The Federal Reserve implemented a 50-basis-point rate cut, driving stock market gains.

U.S. equities surged after the Federal Reserve decided to reduce interest rates by 0.5%, a move more significant than many investors had predicted just a week ago.

While a rate cut had been expected, the exact size remained uncertain. A week earlier, market participants were largely anticipating a more modest reduction of 0.25%. However, recent developments suggested the potential for a larger cut, though uncertainty lingered ahead of the Fed’s announcement.



Out of the 12 members voting, all but one backed the decision to lower the benchmark interest rate, which now stands between 4.75% and 5%. According to projections, additional rate cuts of at least 0.25% are likely during the November and December meetings.

This rate cut "is a positive step" and could offer support to the stock market in the months ahead, noted Yung-Yu Ma, chief investment officer at BMO Wealth Management.

Compared to past years, Ma pointed out that "the current issue in the economy is that short-term rates are too elevated, so by reducing rates, the Fed is directly addressing the problem."

Following the announcement, U.S. stocks rallied, with the S&P 500, Dow Jones, and Nasdaq Composite all posting gains. On Tuesday, major indexes ended nearly unchanged, with the S&P 500 and Dow hovering near record levels.

Treasury yields reversed earlier upward movements, with the 10-year Treasury yield recently at 3.666%, down from 3.694% before the announcement and 3.641% on Tuesday, marking one of its lowest levels this year.

The WSJ Dollar Index extended its decline as the U.S. dollar softened against other major global currencies.